Baseball Valuations Soar

Let's pretend for the time being that Forbes doesn't just stick their finger in the air and make up these valuations (an M&A professor of mine in business school shared that teams have a lot of influence in the Forbes' valuations, hence it shouldn't be a surprise that the Dodgers valuation is a whopping 75% higher than last year when the owner would have preferred a lower valuation while going through a divorce and higher valuation this year when selling the team).

To Forbes:

The average Major League Baseball team rose 16% in value during the past year, to an all-time high of $605 million. In 2011, revenue (net of payments to cover stadium debt) for the league’s 30 teams climbed to an average of $212 million, a 3.4% gain over the previous season. But operating income (in the sense of earnings before non-cash charges and interest expenses) fell 13%, to an average of $14 million in part due to a 5.1% increase in player costs (including benefits and signing bonuses for amateurs), to $3.5 billion in 2011.

But that's not where the money is. It's all in the regional sports networks "RSN's":

The Rolls-Royce of the RSN model is the New York Yankees, who own 34% of the YES Network. The Bronx Bombers are the most valuable team in baseball, worth $1.85 billion, tying them with the National Football League’s Dallas Cowboys for the top spot among American sports teams and placing them second in the world to Manchester United, the English soccer team worth $1.9 billion. YES generated a staggering $224 million in operating income and paid the Yankees a $90 million rights fee in 2011.

So... teams earn an average $14 million each from baseball operations, while the Yankees earn $90 million just from their TV network. Which explains how the Evil Empire (i.e. the Yankees) can blow a seemingly unlimited amount of money on players, while the Mets (one of two teams that actually lost value in 2011) shed payroll because their owner got ripped off by Mr. Bernie Madoff (full disclosure if not already obvious... I am a bitter Mets fan).

Source: Forbes

Economics of Steroids

MLB details:

The story involving David Ortiz and Manny Ramirez took another twist on Friday night when their former Red Sox teammate, Pedro Martinez, decided to weigh in on the controversy.

Ortiz, the only member of the trio remaining with the Sox, confirmed on Thursday that he tested positive for the use of performance-enhancing drugs, during Major League Baseball's 2003 survey testing season.

Since that 2003 positive test, Ortiz' stats have exploded. The other thing that has exploded... his salary.

As long as players have the incentive to increase their earning potential by 30x (in the case of minor leaguers from $30k to $1mm if they make "the big show" and for Ortiz from $1.7mm (what he made through 2002) to $56mm (what he's made since) players WILL continue to cheat the system regardless of the risk in testing positive.

The only threat remaining is the shame in being labeled a user, but that doesn't seem to matter anymore as all players seem to think that if everyone does it, it's not cheating. Pedro Martinez with that example:

"There's no crying in baseball," Martinez said. "We won in 2004. That's it. Are you going to tell me that the other guys, who used it on other teams are now whining? They used it too."

"They used it too"? If I didn't do something and was accused, would I be saying "they did it too"?

Something tells me we haven't heard the last of Pedro and steroids...

Source: Baseball Reference

Mark Buehrle's Perfect Game

MLB reports:

Twenty-seven times, Rays hitters took their cuts off Buehrle. And 27 times, they walked back to the visiting dugout unsuccessful, as Buehrle tossed a perfect game in a 5-0 White Sox victory against the Rays, setting off a wild on-field celebration at U.S. Cellular Field.

"The first couple innings just went by too fast," Rays designated hitter Pat Burrell said. "By the time we realized what we were getting into, I think we were a little late. That being said, that was just awesome, fun to be a part of."

Fast is right. Buehrle, who is known to work much faster than any other pitcher in baseball, needed less than one minute for 2/3 of the batters he faced.




And for those that missed it, check out this catch by (9th inning replacement) Dewayne Wise with no outs in that ninth inning to save the perfect game.... unbelievable.

Yankees Economics

Wondering why Yankees seats look empty?

Click for larger image



Source: NY Post via Kottke.org

Watch out Hack Wilson

A little (or a lot) off topic, but the stats Evan Longoria is putting up in 2009 are unreal (for non-baseball fans, Hack Wilson knocked in 191 runs in 1930). Upon Further Review with the details:

It's still too early to talk about things like the fact that Albert Pujols is on pace to hit 59 home runs or Zack Greinke is on pace to go 32-5 with 316 strikeouts, zero home runs allowed and a record-breaking ERA of 0.51. However, there is one fast start that I want to highlight now that we're five weeks into the season: Evan Longoria's 44 RBIs. That puts Longoria on pace to drive in 236 runs this season.

Will Longoria drive in 236 runs? No. But consider this. If Longoria were to maintain a more attainable, but still amazing, pace of 150 RBI/162 games over the course of Tampa Bay's 130 remaining games, he would drive in 120 runs between now and the end of the season. Add the 44 RBIs he already has in his hip pocket, then he'd finish with 164 RBIs. That would be the most since Manny Ramirez's 165 ribbies in 1999.

Source: Yahoo Sports

A-Rod: "It was Such a Loosey-Goosey Era"

MLB reports:

Rodriguez told veteran baseball reporter Peter Gammons that he used steroids "for a period of time" and only when he was with the Rangers. Rodriguez played for Texas from 2001-03 before being traded to the Yankees prior to the '04 season.

Don't get me wrong, he is still putting up massive numbers, but not like he did during the 01-03 seasons (though it makes you question what substances he is taking now).



I can't believe I am saying this, but I almost feel bad for Yankees fans. It must be tough hating your own team.

Another Reason to Hate the Yankees

The salary of the highest ten players on the Yankees vs. the highest team payrolls from 2008.

Seems bad... well try this one on. 12 teams had smaller payrolls than the combined salaries of just A-Rod, Sabathia, and Teixeira.

When will they learn that you can't pay for chemistry?

Sources: River Ave Blues / Sports Column